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https://ssrn.com/abstract=1343179
 
 

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CEO Ownership and Stock Market Performance, and Managerial Discretion


Ulf von Lilienfeld-Toal


Luxembourg School of Finance

Stefan Ruenzi


University of Mannheim - Department of International Finance

May 1, 2013

Journal of Finance, Forthcoming

Abstract:     
We examine the relationship between CEO ownership and stock market performance. A strategy based on public information about managerial ownership delivers annual abnormal returns of 4 to 10%. The effect is strongest among firms with weak external governance, weak product market competition, and large managerial discretion. This suggests that CEO ownership can reverse the negative impact of weak governance. Furthermore, owner CEOs are value increasing: they reduce empire building and run their firms more efficiently. Overall, our findings indicate that the market does not correctly price the incentive effects of managerial ownership, suggesting interesting feedback effects between corporate finance and asset pricing.

Number of Pages in PDF File: 102

Keywords: Managerial Ownership, Asset Pricing with Large Shareholders, Managerial Discretion

JEL Classification: G12, G30


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Date posted: February 16, 2009 ; Last revised: May 8, 2013

Suggested Citation

Lilienfeld-Toal, Ulf von and Ruenzi, Stefan, CEO Ownership and Stock Market Performance, and Managerial Discretion (May 1, 2013). Journal of Finance, Forthcoming. Available at SSRN: https://ssrn.com/abstract=1343179 or http://dx.doi.org/10.2139/ssrn.1343179

Contact Information

Ulf Von Lilienfeld-Toal (Contact Author)
Luxembourg School of Finance ( email )
162a, avenue de la Faïencerie
Luxembourg-Limpertsberg, L-1511
Luxembourg
Stefan Ruenzi
University of Mannheim - Department of International Finance ( email )
L9, 1-2
Mannheim, 68131
Germany
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